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Home economics: Our property finance expert answers your questions

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Joey Sheahan

Joey Sheahan

Joey Sheahan

Q I can pay off my mortgage in full or 75pc, with the balance continuing in monthly repayments. I'm 40 without children. I have a balance of €85,000 at 3.15pc p.a. interest ending in 2045. I do not have any other debts. Will it be worth paying it off completely or will I be losing money by doing so?

A In a low interest-rate environment, it's always trickier to answer this because the money can't necessarily be put to better use without risk. You don't have other debt to pay down either, so it simply leaves you with a cash-flow decision.

Joey Sheahan, author of The Mortgage Coach, ran the figures for you: The total interest you're paying currently for the remainder of the term is €37,922.71. If you paid off three quarters of the loan, this would save €21,250 in total, and reduce your payments to €102.44 per month. However, the optimal solution is to do this, while also reducing the term to say five years.

This would result in monthly repayments of €383.25, but cost you just €1,745.17 in overall interest, if you're not on a fixed rate and the bank allows it. This frees up monthly cash, keeps some savings for emergencies and leaves you mortgage free by 45, an enviable position to be in.

Q My mum (80) has Kerry plc shares left by my late father that she wishes to gift to my son (24) as a deposit on a house, worth about €80,000. I know he has to pay gift tax on these and she may be liable for CGT. What are the best options to minimise it? Is there any advantage in giving me the value (her son) and I passing it on to my son?

A If she gifts to her grandson, she will be subjected to capital gains tax (CGT) at 33pc, which is the difference between market value (MV) of shares at the date of the death of her husband, less cost of acquisition and a personal exemption of €1,270, says Joanna Murphy, CEO of Taxback.com.

"The beneficiary (her grandson) would be subject to capital acquisition tax (CAT) at 33pc on the MV of shares at the date of the gift. He can use the small gift exemption of €3,000 to reduce the taxable value. His lifetime tax-free group threshold will also be offset against the taxable value of the gift. The relationship between grandmother and grandson is group B threshold, which is €32,500. 

"There is a relief that could be used in the above scenario. Where CGT and CAT are paid on the same event, CGT paid may reduce the amount of CAT due, however, there is a clawback of the relief if the beneficiary disposes of the asset within two years after he/she acquires the gift." The beneficiary will be subject to 1pc stamp duty on the market value of shares.  

If she bequeaths the shares to her grandson by will, no CGT is due on death, however CAT will be due and obviously, he cannot benefit immediately from the asset. There's also no stamp duty on inheritances. 

Gifting the shares to you to avail of the Group A threshold (€335,000) would fall foul of anti-avoidance tax rules; the second gift (on to your son) cannot be made within three years, otherwise he'll be considered the primary beneficiary. 

The best option is if she bequeaths the shares directly to you (no CGT, stamp duty or CAT), and then you gift to your son with minimal CGT. However, you'll have to wait until after she passes to avail. 

Whether it's shares or cash is irrelevant.

 

The Ryan Review

It isn’t Covid-19 related, we are assured, but in a way, that makes it worse.

The collapse of yet another credit union into the hands of liquidators is a cause for concern.

Drumcondra was in trouble before now; even a bailout by its parent body couldn’t save it as it fell foul of reserve issues, which have beleaguered the sector. Irish people place high stock in the credit union brand. Every year, it pitches up in terms of awareness, trust and consumer friendliness, which many a retail bank would give its eye teeth for.

Yet some simply cannot seem to fulfil their obligations (which admittedly, are onerous), and it begs questions about the future of the movement. No customer will be affected, largely because of the State’s deposit guarantee scheme, but it isn’t really good enough to have to rely on this to rescue failed operations which could, and should, have been better managed.

There are 240 credit unions in Ireland. Part of their success is their locality, staffed by people in the town. But there is a job of work remaining with many of them that at the upper echelons, where there is simply not enough external professionalism. Maybe being too local is as much a problem as a boon.

Sinead presents The Home Show on Newstalk every Saturday morning at 9am

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